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On the STEM myth and employer privilege

Dean Baker highlights a quote from the NYTimes, on the increasing percentage of young Americans completing college, to make a point about the common refrain of a supposed lack of highly-educated workers:

It is not clear what this [lack of high-skilled workers] evidence would be. The unemployment rate for college graduates, although down from its peak in 2010, is still close to twice its pre-recession level. In addition, wages for college graduates without advance degrees were stagnant even before the recession. These facts suggest that the economy is not suffering from a shortage of highly educated worker, although there may be some narrow occupations and locations in which shortages appear.

The STEM shortage debate, on whether the United States is facing a one at all, isn’t something I’ve delved into compared to other subjects but it is something I’ve followed. For years industry CEO’s in STEM-related fields and like-minded advocates have complained about a lack of highly educated, skilled workers to fulfill jobs. These complaints have translated into somewhat of a conventional wisdom because media outlets tend to take Very Important People and their concerns at face value. Also, for the same number of years, people who’ve bothered even a cursory glance at the data, like Baker does, finds that the evidence doesn’t support business’s conclusion. Rather, the truth seems to be closer to what Adam Davidson uncovers here; that the skills gap is more like a unwillingness to pay highly-educated people more money than a shift manager at McDonalds gap.

As he writes;

Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. Last year, he received 1,051 applications and found only 25 people who were qualified. He hired all of them, but soon had to fire 15. Part of Isbister’s pickiness, he says, comes from an avoidance of workers with experience in a “union-type job.” Isbister, after all, doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

Hence, the STEM myth. It has become pervasive enough to warrant a 6.7 percent increase in proposed federal funding emphasis; an initiative (PDF) to streamline and increase STEM education in order to create “the skills today’s employers are looking for to fill jobs right now and in the future.” In this same vein of interest tech companies advocate for immigration reform that allows more STEM-proficient workers to enter the country. For all intents and purposes you can restate that as tech companies pushing for importing cheap STEM labor. As to other sectors state and federal government have become convinced, again from the president’s policy initiative, to encourage “partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math.” Which can be restated as encouraging the public to go further in subsidizing training for private companies. This isn’t necessarily an indictment of such actions — there can be other reasons for wanting to increase HSI and establish public-private educational partnerships increase specific skills in the workforce.

Rather, this is a judgement of motives. I’m not entirely sure why such employers think their conundrum has nothing to do with their unwillingness or inability to pay an attractive wage. The cynics take is to say they know what they’re doing and what’s really holding them back, but would rather focus on rent-seeking. Another view is that they’ve just convinced themselves that the skills gap really exists and they’re simply being good corporate citizens by wanting a more skilled workforce. Yet both perspectives implies a more troubling phenomenon of employers expecting a certain, historically elevated, privilege in their bargaining position with the labor force.

Labor’s share of national income has never recovered from it’s peak in the ’60s and has especially plummeted since the recession (see FRED). Now this may or not be as a result of long-term trends in the unionization of the labor market. For my point here it doesn’t matter how things came to be because either way it establishes a new normal for which private interests protect in a way that disadvantages everyone else — wages should be this low, employment should be a concern for the state only insomuch as it promotes cheap labor for incumbent businesses, and every subsequent increase in the relative power of employers should become a privileged consideration for changes in economic policy.

This isn’t a populist cry against business lobbying so much as a plea to remember that private sector motives are not incontestable. It is also, as Chris Dillow recently wrote, a reminder that:

You cannot understand economics without understanding power. The fact is that bosses’ power has risen and (many) workers’ power has declined. In this sense, the rising incomes of the 1% and the fall in real wages for the average worker are two manifestations of the same process.

We should recognize that this process is having deleterious consequences for workers in the form of wage stagnation and increasing income inequality. The relative advantage of business in this regard shouldn’t go unquestioned and governments shouldn’t treat it as policy gospel.